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CAMPAIGN FINANCE; Excerpts From Ruling on the Campaign Finance Law

Following are excerpts from the ruling by a three-judge federal panel on the Bipartisan Campaign Reform Act of 2002, which limits political campaign donations. The full text is online at nytimes.com/washington.

Introduction

With one exception, the court also finds the disclosure provisions relating to ''electioneering communications'' constitutional. The factual record demonstrates that the abuse of the present law not only permits corporations and labor unions to fund broadcast advertisements designed to influence federal elections, but permits them to do so while concealing their identities from the public. BCRA's disclosure provisions require these organizations to reveal their identities so that the public is able to identify the source of the funding behind broadcast advertisements influencing certain elections.

Plaintiffs' disdain for BCRA's disclosure provisions is nothing short of surprising. Plaintiffs challenge BCRA's restrictions on electioneering communications on the premise that they should be permitted to spend corporate and labor union general treasury funds in the 60 days before the federal elections on broadcast advertisements, which refer to federal candidates, because speech needs to be ''uninhibited, robust, and wide-open.''

Curiously, plaintiffs want to preserve the ability to run these advertisements while hiding behind dubious and misleading names like: ''The Coalition: Americans Working for Real Change'' (funded by business organizations opposed to organized labor), ''Citizens for Better Medicare'' (funded by the pharmaceutical industry), ''Republicans for Clean Air'' (funded by brothers Charles and Sam Wyly).

Given these tactics, plaintiffs never satisfactorily answer the question of how ''uninhibited, robust, and wide-open'' speech can occur when organizations hide themselves from the scrutiny of the voting public. Plaintiffs' argument for striking down BCRA's disclosure provisions does not reinforce the precious First Amendment values that Plaintiffs argue are trampled by BCRA, but ignores the competing First Amendment interests of individual citizens seeking to make informed choices in the political marketplace. As a result, the Court finds Section 201 facially constitutional, with the exception of one subsection which the Court determines to be broader than necessary to achieve the legitimate governmental interest at stake.

The provision's disclosure requirements are challenged by the McConnell, AFL-CIO, Chamber of Commerce, NAB, NRA, and Paul plaintiffs. Plaintiffs' challenge to Section 201's disclosure provisions focuses on two aspects of the law: (1) its requirement of disclosure prior to the airing of electioneering communications; and (2) its requirement that disbursers disclose the names of contributors who gave over $1,000 to the disbursing fund.

The Court addresses each in turn.

The McConnell plaintiffs, AFL-CIO, Chamber of Commerce, and NAM object to Section 201's disclosure requirements on the ground that they mandate disclosure of not only actually aired electioneering communications, but also contracts to make such communications. This advance disclosure, plaintiffs argue, ''serves no governmental interest and will chill the exercise of free speech by forcing groups . . . to disclose ongoing and confidential political strategies and decision-making processes, and by giving adversaries the opportunity to try to thwart broadcasts or counter them with their own messages.''

Defendants argue that the then-pending (and now final) regulations interpret the notice requirements as not mandating disclosure until after the advertisements have been publicly distributed. The content of the regulations, argue defendants, ''moot plaintiffs' concerns, [make] plaintiffs' claims to injury . . . wholly speculative and their challenge to this aspect of BCRA's disclosure provisions is therefore unfit for judicial resolution.''

The Court cannot agree that plaintiffs' challenge to the disclosure requirements in Section 201 is not ripe for review. Unlike the situation confronted by the Court in examining the disclosure requirement of Section 212, the regulations promulgated for Section 201 do not eliminate plaintiffs' prior disclosure concerns. The regulations, despite the F.E.C.'s explanation of the provision, appear to still require prior disclosure of electioneering communications that have not yet aired. Specifically, the definition of ''disclosure date'' leaves uncertain what must be disclosed after the airing of an electioneering communication when the disburser has executed contracts for electioneering communications aggregating over $10,000. The regulations suggest that if a person has executed $10,000 in electioneering communications contracts, 24 hours after the first such communication is aired, the disburser must make a disclosure encompassing all of the electioneering communications under the contracts. The Court notes that its jurisdiction does not extend to the F.E.C.'s BCRA regulations, and therefore it makes no determination on their validity or proper construction. However, given the uncertainty it finds with regard to the scope of the regulations, the Court cannot conclude that plaintiffs' challenge is not ripe. The extent of the chill upon First Amendment rights induced by vague or overbroad statutes is the most significant factor in determining whether an otherwise premature or abstract facial attack . . . is ripe for decision.''

Where other cases have found facial First Amendment challenges ripe for review, ''either the activities in which the complainants wished to (or had) engaged or the enforcing authority's particular intent to enforce the statute, or both, were clear enough to show the adversarial posture assumed by the parties and the contours of their dispute.'' Here, plaintiffs have clearly engaged in ''electioneering communications'' in the past, and the F.E.C. regulations promulgated on January 3, 2003, indicate that the agency intends to enforce BCRA Section 201, including its ''contracts'' provision. Given these facts, the Court finds that plaintiffs ''have alleged an actual and well-founded fear that the law will be enforced against them,'' which threatens the danger of ''self-censorship; a harm that can be realized even without an actual prosecution.'' Analysis of Section 201 commences with the guidance that disclosure provisions ''in most applications appear to be the least restrictive means of curbing the evils of campaign ignorance and corruption.'' However, disclosure provisions are subject to exacting scrutiny analysis ''because compelled disclosure has the potential for substantially infringing the exercise of First Amendment rights.'' The Supreme Court has found three categories of ''governmental interests sufficiently important to outweigh the possibility of infringement.'' The Supreme Court stated:

First, disclosure provides the electorate with information as to where political campaign money comes from and how it is spent by the candidate in order to aid the voters in evaluating those who seek federal office. It allows voters to place each candidate in the political spectrum more precisely than is often possible solely on the basis of party labels and campaign speeches. The sources of a candidate's financial support also alert the voter to the interests to which a candidate is most likely to be responsive and thus facilitate predictions of future performance in office.

Second, disclosure requirements deter actual corruption and avoid the appearance of corruption by exposing large contributions and expenditures to the light of publicity. This exposure may discourage those who would use money for improper purposes either before or after the election. A public armed with information about a candidate's most generous supporters is better able to detect any postelection special favors that may be given in return . . .

Third, and not least significant, record-keeping, reporting, and disclosure requirements are an essential means of gathering the data necessary to detect violations of the contribution limitations described above.

Buckley upheld the constitutionality of Section 434(e) of FECA, which required disclosure of independent expenditures, although the Supreme Court did limit the provision to only those expenditures used for ''communications that expressly advocate the election or defeat of a clearly identified candidate.'' The provision was found to be ''part of Congress' effort to achieve total disclosure . . . in order to insure that the voters are fully informed and to achieve through publicity the maximum deterrence to corruption and undue influence as possible.'' The Supreme Court deemed the measure ''responsive to the legitimate fear that efforts would be made, as they had been in the past, to avoid the disclosure requirements by routing financial support of candidates through avenues not explicitly covered by the general provisions of FECA.'' . . .

The Court finds that Section 201, by including subsection 5 of Section 201, BCRA Section 201(a); FECA Section 304(f)(5); 2. U.S.C. Section 434(f)(5), which equates contracts to make disbursements with actual disbursements requiring disclosure of contracts to make electioneering communications prior to their public dissemination, lacks a ''relevant correlation'' or ''substantial relation,'' to a legitimate governmental interest.

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This constitutional flaw, however, does not render Section 201 unconstitutional in its entirety. BCRA provides that ''[i]f any provision of this Act . . . or the application of a provision . . . to any person or circumstance is held to be unconstitutional, the remainder of this Act . . . and the application of the provisions . . . to any person or circumstance, shall not be affected by the holding.'' As the Supreme Court noted in Buckley, ''unless it is evident that the legislature would not have enacted those provisions which are within its power, independently of that which is not, the invalid part may be dropped if what is left is fully operative as a law.''

Given this guidance and the clear import of Section 401 of BCRA, the Court holds that the remainder of Section 201 is severable from subsection (5). It is clear that the value of disclosing electioneering communications disbursements is not dependent on their disclosure prior to broadcast, and the Court cannot say that it is ''evident that the legislature would not have enacted'' the remaining disclosure provisions of Section 201 in the absence of subsection (5). The remainder of Section 201 adequately serves the purpose of ''informing the public about various candidates' supporters before election day,'' without requiring advance disclosures that could potentially chill the exercise of free speech rights.

The Court therefore finds that Section 201's requirement that electioneering communications that have not yet aired but have been contracted for is unconstitutional, but that by severing subsection (5), the provision's prior disclosure concerns are remedied and the remainder of the section is constitutional. Plaintiffs ACLU, Chamber of Commerce, NAM, and NRA challenge Section 201's requirement that electioneering communications disbursers disclose the names of persons who have given $1,000 or more to the disbursing fund. Plaintiffs argue that for ''controversial groups, such threatened disclosure can have a deadly chilling effect on the group's advocacy.'' The NRA argues that the provision suffers from the same infirmities as those in FECA struck down by the D.C. Circuit, as BCRA's ''disclosure requirements reach the very same outside 'groups engaging in nonpartisan discussion.' '' Finally, the Chamber of Commerce argues that Section 201's disclosure requirements are overbroad, because at least ''when the advertiser is the Chamber, the interest served by the ad is reasonably clear.'' Defendants argue that the disclosure of individual contributors is necessary because many sponsors of issue advertisements conceal ''their identity from the public by electioneering pseudonymously, through front organizations such as 'The Coalition: Americans Working for Real Change,' 'Citizens for Reform.' '' Indeed, the Supreme Court has observed that ''when individuals or corporations speak through committees, they often adopt seductive names that may tend to conceal the true identity of the source.''

This observation has been buttressed by the evidence presented in this case. For example, PhRMA, a pharmaceutical industry trade group, the Chamber of Commerce, and two brothers from Texas, have produced issue adds under the names ''Citizens for Better Medicare,'' ''Americans Working for a Real Change,'' and ''Republicans for Clean Air,'' respectively.

A recent poll showed that 61 percent of Americans want to know who is behind these issue advertisement organizations. Plaintiffs' briefs provide no evidence to the contrary and do not attempt to argue that the government lacks a legitimate interest related to the disclosure requirements; in fact, many of their experts voice the same concerns. The Court finds that the evidence presented establishes that a legitimate governmental interest is served by the donors disclosure requirement, and reaffirms the Buckley observation that ''the corruption potential of [independent uncoordinated] expenditures may be significantly different [than coordinated expenditures], but the informational interest can be as strong as it is in coordinated spending, for disclosure helps voters to define more of the candidates' constituencies.'' Without disclosure of donors, it is difficult, if not impossible for the voting public to know who is sponsoring political advertisements under amorphous and nondescript pseudonyms. Indeed, even those experienced in politics, political scientists, and members of the media find it difficult to know who is behind some political advertisements. Without Section 201's disclosure requirements, it will continue to be extremely difficult for the public to learn that groups, such as PhRMA, or individuals, like the Wylys, are the true source of millions of dollars in potential advertisements run under banners such as ''The Coalition'' or ''Citizens for Better Medicare.''

This conclusion, however, does not end the inquiry. The Supreme Court has been mindful of the chilling effect disclosure can have on associational rights, and has declared that ''state action which may have the effect of curtailing the freedom to associate is subject to the closest scrutiny.'' ''The strict test established by NAACP v. Alabama is necessary because compelled disclosure has the potential for substantially infringing the exercise of First Amendment rights.'' Although disclosure requirements are often ''the least restrictive means'' of regulating campaign finance practices, ''in some instances disclosure may even expose contributors to harassment or retaliation.'' In Buckley, the Supreme Court considered the argument that contributions made to independent candidates and minor parties should be exempt from FECA's disclosure requirements. The Supreme Court rejected the challenge, concluding that the evidence presented was ''not of the sort proffered in NAACP v. Alabama.'' The evidence that was presented in Buckley was found by the Supreme Court to be ''at best . . . the testimony of several minor-party officials that one or two persons refused to make contributions because of the possibility of disclosure,'' and therefore failed to persuade the Supreme Court that ''the substantial public interest . . . outweighs the harm generally alleged.'' Buckley instructs that when a legitimate government interest is served by a disclosure provision, constitutional challenges claiming the disclosure will chill associational rights must be accompanied by evidence which shows a reasonable probability that the compelled disclosure of a party's contributors' names will subject them to threats, harassment, or reprisals from either government officials or private parties. The proof may include, for example, specific evidence of past or present harassment of members due to their associational ties, or of harassment directed against the organization itself. A pattern of threats or specific manifestations of public hostility may be sufficient.

For this reason, the ACLU's facial challenge to Section 201 is unavailing. Neither N.A.A.C.P. nor Brown stand for the proposition that disclosure laws that apply to organizations ''whose positions are often controversial and whose members and contributors frequently request assurances of anonymity'' are facially unconstitutional. Rather, as explained above, the statutes in those cases were held inapplicable to the groups in question based on the facts presented, not invalid on their face.

The Chamber of Commerce provides evidence that some contributors to its coalition, ''Americans Working for a Real Change,'' did not want to be publicly identified due to fears of ''what some would call union harassment activities.'' Once again, the Court was not presented with evidence of a reasonable basis for these fears. Furthermore, no member ever told Mr. [Stephen E.] Sandherr [chief executive officer, Associated General Contractors of America] they were contributing $200 or less to AGC's PAC in order to avoid disclosure, and no contributor to AGC's PAC has reported union retaliation in response to their contribution to the PAC.

Neither group's evidence meets the Buckley standard.

In sum, although many deponents relate what they believe, or have been told, were the reasons contributors did not want to have their names disclosed, that is union retaliation or employment termination, the lack of specific evidence about the basis for these concerns leaves the Court unable to find there exists ''a reasonable probability that the compelled disclosure of [any of these organizations'] contributors' names will subject them to threats, harassment, or reprisals from either government officials or private parties.'' Furthermore, no plaintiff cited evidence, and the Court has found none, that their organization, as opposed to the organization's members or contributors, has been subjected to threats, harassment or reprisals. Although these groups take stands that are controversial to segments of the public, and may believe that they are targeted because of the positions they take, none has provided the Court with a basis for finding that their organization, and thereby their membership, faces the hardships that the NAACP and SWP were found to suffer by the Supreme Court. However, nothing in this Court's decision affects the ability of groups in the future from challenging, as the NAACP and the SWP did in the past, the application of Section 201's disclosure provisions to their organization.

The Court addresses next the NRA's argument that the D.C. Circuit's invalidation of FECA's Section 437a renders Section 201's requirements invalid as well. In Buckley, the D.C. Circuit found FECA's independent expenditure disclosure provision unconstitutional. The Court of Appeals stated that ''issue discussions unwedded to the cause of a particular candidate hardly threaten the purity of elections . . . [and] are vital and indispensable to a free society and an informed electorate. Thus the interest of a group engaging in nonpartisan discussion ascends to a high plane, while the governmental interest in disclosure correspondingly diminishes.'' Even so, the D.C. Circuit rested its decision on the overbreadth of Section 427a's ''crucial terms: 'purpose of influencing the outcome of an election' and 'design to influence' individuals in voting at an election.'' Unable to find a ''readily available narrowing interpretation'' of the crucial terms in light of Congress's manifested intent, the Court of Appeals held the section unconstitutional. Given that the basis for the D.C. Circuit's invalidation of Section 427a rested on the provision's language and legislative history, the Court does not accept the NRA's suggestion that the Court of Appeals's decision controls this Court's analysis of Section 201's disclosure requirements. Section 201 only requires disclosure of ''electioneering communications,'' the definition of which this Court finds is constitutional. . . .

Finally, the Chamber of Commerce argues that Section 201 as applied to its electioneering communications, is overbroad because the public knows that the Chamber represents the interests of American business.The Court interprets the Chamber's position, encompassing all of three sentences, to mean that under BCRA it should be sufficient that the Chamber report that it is behind advertisements sponsored by, for example, ''Americans Working for a Real Change'' and that listing its $1,000 contributors would be unnecessary for the voting public to know the interest behind the advertisement. The Court first notes that the Chamber does not provide, and the Court cannot formulate, a disclosure rule that would take into account the notoriety of the groups involved (for example, a law that exempts ''well-known'' groups from disclosing the names of their $1,000 contributors, while ''less well-known'' groups would be required to make the disclosures). In addition, the Chamber provides no legal support for its theory. . . . The Court therefore rejects the Chamber of Commerce's argument.

In conclusion, the Court states what Section 201's disclosure requirements do and do not require. First, they apply only to electioneering communications, which we find constitutional. Second, Section 201 does not prevent anyone from making electioneering communications; it only requires that when persons do make such advertisements that they disclose the source of the communication's funding after they are broadcast. Lastly, the provision does not require the wholesale disclosure of all donors to the sponsoring organization, rather only donors contributing $1,000 to the disbursing account must be disclosed. Organizations are free to set up ''segregated bank accounts,'' funded by individuals' contributions, for electioneering communication disbursements. If electioneering communication disbursements made from such segregated accounts then reach the $10,000 threshold, only the names of the segregated account's $1,000 contributors will have to be disclosed. Lastly, any group can file suit to challenge the constitutionality of the application of Section 201's disclosure provisions to their contributors based on a showing such as ''threats, harassment, or reprisals from either government officials or private parties.''

In conclusion, the Court finds Section 201 constitutional on its face, with the exception of subsection (5), which the Court determines to be broader than necessary to achieve the legitimate governmental interest at stake because of its inclusion of future contracts for electioneering communications. For that reason, the Court severs subsection (5) and finds the remainder of Section 201 constitutional.